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Why is the Annual Percentage Rate (APR) on the Truth-In-Lending Disclosure different from my interest rate?

April 26, 2017Annual Percentage Rate Apr different disclosure Interest rate truth-in-lending

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Why is the Annual Percentage Rate (APR) on the Truth-In-Lending Disclosure different from my interest rate?

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The Annual Percentage Rate and the interest rate are not the same. The APR is the cost of the loan taking into account various loan charges, of which interest is, only one such charge. Other charges used in calculating the APR are discount points, origination fees, PMI, pre-paid interest and other credit costs. The APR is calculated by spreading these charges over the life of the loan, which results in a rate higher than the interest rate shown on your note. If interest were the only charge associated with your loan, the APR and the interest rate would be the same.